The Small Business Administration has always been an interesting agency. You don’t hear about it as much as you do about other agencies. But today in America, small firms make up over 95% of American employers. They generate over 65% of net new private sectors jobs and account for 50% of private sector employment. And the SBA provides or backstops loans to a large portion of those small businesses.
The new Administrator of the Small Business Administration, Maria Contreras-Sweet, has laid out an ambitious agenda to make the SBA faster, more efficient and more accessible to new business owners and entrepreneurs. The Administrator herself has a background that gives her unique insights into the needs of today’s business community. She launched one of the nation’s first bank’s for Hispanic Americans and grew it into one of the largest community banks in California. She went on to serve in the California Cabinet before joining the Obama Administration. She also has the privilege of following one of President Obama’s best Cabinet Secretaries, former SBA Administrator Karen Mills. Administrator Mills correctly focused a lot of energy on making the SBA a more effective lender to high growth startups through the creation or expansion of existing lending facilities, and by placing SBA squarely in the middle of the national discussion about economic growth. Administrator Contreras-Sweet will no doubt continue this work, but will also modernize SBA’s infrastructure and provide greater access to capital.
The Administrator choose the Center for American Progress to announce her priorities because of
The SBA will invest heavily in more modern, data-driven technology systems to serve its borrower’s better. They will modernize their capital access programs to reduce the complexity and person-hours required to apply for, secure and comply with an SBA loan. This new, borrower and partner friendly platform will be called “SBA One”.
In addition, the new SBA platform will be a smart, predictive system. The SBA’s Office of Capital Access is currently testing and refining a new predictive business credit and scoring model that combine’s an entrepreneurs personal and business credit scores. This could be a big step in providing more Americans and entrepreneurs with the access to capital they need to grow their business. Credit scoring is often still based on algorithms that were developed 10-20 years ago. But today, in the era of Big Data, we have access to so much more information about the entrepreneur that can be used to assess their credibility as a borrower. The SBA would like to make this new model available to all of its lending partners for loans of $350,000 or less. This could have huge ramifications by reducing the cost to banks of processing and providing small loans, and for using data analytics for more effective credit scoring.
Secondly, SBA Administrator Contreras-Sweet emphasized her desire to make the SBA’s loan portfolio and programs reflective of the demographics of the United States. Since the Great Recession, SBA lending to African American’s, Hispanic Americans and immigrants has dropped significantly. This is counter-intuitive to the trend among these groups to embrace entrepreneurship, and their roles in revitalizing urban areas. The Administrator stated her belief that lending could go back up to these communities through better analytics and technology, and through greater outreach by the SBA field offices.
Lastly, the SBA wants to use its clout in the market, and its position in the Cabinet to play the role of match-maker. It would like to be more active in matching its borrower’s with federal government procurement opportunities – including training and access to programs for entrepreneurs and small business to become federal contractors or sub-contractors to large companies working on government projects.
Although she did not have time to discuss this, I would also like to see the SBA continue its efforts to expand the SBIR and STTR programs. The SBIR program is one of the most popular programs among startup companies in the United States, and could easily expand to provide more grants to innovation-driven companies. The STTR program can also be accessed by institutions working in partnership with startups, and could be a great source of funding for accelerators around the country. The current version of the America Competes Act provides for such an expansion of the STTR.
On a separate, but related note, Representative Eric Cantor’s loss this week in Virginia’s primaries will have ramifications for entrepreneurship policy. Representative Cantor was one of the key Congressional backers of the America JOBS Act of 2012, which provided a series of benefits to high-growth companies, including the legalization of equity-based crowd-funding. Rep. Cantor worked closely with President Obama, during an election year, to make sure this legislation became law in rapid time. In addition, his apparent openness to immigration reform appears to be one of the reasons he lost. This too, is unfortunate for entrepreneurs. A recent article in
An ambitious, exciting agenda from Administrator Contreras-Sweet. It reflects an inherent trust in the American entrepreneur to succeed and create value – for their communities and our economy. Hopefully others on the Hill will see this.
The author is a Senior Fellow at the Center for American Progress.
